EnQuest climbs on back of Kraken awakening

EnQuest Plc climbed the most in three months in London trading on speculation borrowings will fall following the start of production at its Kraken oil field in the North Sea.

The stock rose as much as 11% on Monday, the biggest gain since March 15, after saying Kraken’s first oil was delivered on June 23.

Niki Kouzmanov, an analyst at Jefferies International Ltd. in London, said: “This is the big catalyst for EnQuest that we were looking for to drive material deleverage of the balance sheet,”

Net debt was $1.91 billion at the end of April.

EnQuest gave the go-ahead for Kraken, in the East Shetland basin, in late 2013, assuming an oil price of $90 a barrel for the 25-year project.

Less than a year later, the market entered its worst slump in a generation, forcing explorers to curb drilling plans in the North Sea, one of the world’s costliest places to pump oil.

Kraken is one of the few projects in the region to start on time and under budget.

Stephane Foucaud, an analyst at GMP FirstEnergy in London, said: “This has been the exception rather than the norm in the North Sea over recent years.

“This highlights the execution strength of EnQuest.”

Kraken is also the only heavy oil project set to come online this year in the wider North Sea, according to energy consultancy Wood Mackenzie.

Kevin Swann, research manager of U.K. Upstream at Wood Mackenzie, said: “Although other heavy oil fields have produced in the U.K., this is the first of a batch of projects that were discovered some time ago but were previously deemed too challenging technically to develop.”

EnQuest, which owns 70.5% of the Kraken development, traded up 7.6% at 31.75 pence as of 1:51 p.m. local time Monday.

Cairn Energy Plc, which owns the rest of the field, was down 0.6% to 168.9 pence. Benchmark Brent crude was at $45.63 a barrel.

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